(Sacramento) - Assemblymember Ted Lieu (D-Torrance) today announced the Governor signed into law his landmark mortgage reform legislation to address the systematic failures in California’s mortgage industry. AB 260 is one of the most comprehensive new mortgage reform laws in the nation.
“Look out Wall Street, California is no longer the Wild West,” said Assemblymember Ted Lieu. “Although it took two years, I am pleased to have been able to overcome the powerful interests blocking reform so that future generations won’t ever experience this type of crisis. This is a big win for consumers and for the future of California’s housing market.”
AB 260, also joint-authored by Speaker Karen Bass and Assemblymember Pedro Nava, is California’s comprehensive reform response designed to bring trust and security back to the state’s mortgage market, protect borrowers from the most abusive lending practices that caused the foreclosure crisis, and reassure the secondary market that loans bought in California are sound.
“Fraudulent mortgage practices have not only devastated California's economy and caused record unemployment, they have also triggered a national and international financial meltdown,” said Assemblymember Ted Lieu. “This new law cracks down on some of the most abusive lending practices and places significant safeguards on the industry to ensure this crisis never happens again.”
Specific provisions of this bill include: prohibiting the steering of borrowers into higher-priced loans that are more risky than lower-interest, fixed-rate loans for which the borrower had actually qualified; banning negative amortization loans where the loan gets larger the longer the borrower holds the loan; and putting strict caps on prepayment penalties. This bill also enacts a strong fiduciary standard for all mortgage brokers and banks acting as mortgage brokers, and prohibits lenders and brokers from making false or misleading statements relative to the terms of a subprime loan.
“The Governor’s approval of AB 260 is a message that California is no longer the Wild West for the lending industry,” said Pedro Morillas CALPIRG Consumer Advocate. “California has finally taken the first step towards reining in the excesses of banks and brokers.”
California continues to be ground zero for home foreclosures, a direct result of irresponsible lending. According to RealtyTrac, California experienced 92,326 foreclosure filings in August 2009, amounting to one filing approximately every 30 seconds.